Maker of Mr Kipling cakes and Bisto Gravy Premier Foods (LON:PFD) has announced plans for an increased focus on cost efficiencies and cash generation as sales growth due to the “recent and rapid change” in the food industry.
Despite promising investors that it could cope with independence and did not need to be acquired by US spice maker McCormick (NYSE:MKC), sales and profits have since wavered.
“This financial year has been a challenging one for the industry, with the return of food inflation and changing retailer promotional strategies. With the industry changing rapidly, we have updated our strategy to give an equal focus to revenue growth, cost efficiencies and cash generation,” said Gavin Darby, chief executive.
“We plan to deliver progress in FY17/18 while noting this progress is expected to be weighted more to the second half of the year.” he added, saying that 2017 had got off to a “solid” start.
For the year up till April, Premier Foods reports a 1.4 percent slump in sales to £801.3 million. Pre-tax profits were 7.7 percent lower at £12 million and the groups trading profits were down by 9.3 percent to £117 million.
The company hope to save an ambitious £20 million over the next two years. This will be achieved through also combining its grocery and ‘sweet treats’ logistics and making 50 head office staff redundant and reducing the leadership team.
“Premier is a business that continues to make attractive trading margins by industry standards but, it has to run hard to only go backwards in terms of building profitability and it cannot shake-off the fundamental burden of total indebtedness.” said Clive Black, an analyst at Shore Capital.
Premier Food shares were one percent down in early morning London trading at 42.5p. This was well below the informal 65p-a-share offer from McCormick this time last year.